What Is Category Creation?
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Category creation is the practice of defining and naming a new problem, and the market around solving it, so that your company becomes the reference point for everyone who enters later. Instead of asking buyers to compare you with the incumbents on the incumbents' terms, you give them a new box to put you in.
It sounds like branding. It's closer to strategy. A category tells buyers what a product is, what to compare it with, and what "good" looks like. Whoever writes those answers first shapes the buying criteria for everyone else. That's the prize, and it's also why it's so easy to get wrong.
Category creation, in plain terms
A category is a shared mental shelf. When a buyer says "I need a CRM" or "I need a project tracker," they already know roughly what to expect, what it costs, and who the usual vendors are. That shared understanding saves the buyer time and it saves vendors from explaining everything from scratch.
A new category appears when a company changes the problem rather than the product. The pitch stops being "we're a better version of X" and becomes "X was the wrong way to think about this." The company then has to teach the market a new vocabulary, prove the problem is real, and get customers to budget for something that had no line item before.
Three pieces usually have to exist together:
- A problem people already feel but can't name. Teams hit it every week, yet nobody has a label for it.
- A name and a point of view. The label turns a vague pain into something a budget owner can request.
- A product that proves the claim. Without it, the name is just a slogan.
The Play Bigger idea: category design and the category king
The most cited modern framework here comes from the book Play Bigger by Al Ramadan, Dave Peterson, Christopher Lochhead and Kevin Maney (Harper Business, 2016). The authors call their discipline category design. According to Insight Partners' description of a Play Bigger webinar, the book uses data analysis, interviews and research to study "category kings," companies such as Amazon, Salesforce, Uber and IKEA that give people new ways of living, thinking or doing business.
The core claim is that the company that defines a category tends to dominate it, and that the leader is a different thing from the best-known player in a crowded market. A category king isn't just first. It's the company that set the definition everyone else is measured against.
The book is also widely quoted for a figure about how much market value the leader captures. We haven't been able to verify that number against a primary page from the authors or their publisher, so we're not printing it here. If you want the data, read the book and check their methodology yourself.
Where this sits next to other strategy ideas
Category creation overlaps with several older ideas. They're related but not identical.
Blue Ocean Strategy. Both argue that you can win by escaping a crowded fight. Blue ocean thinking is about creating uncontested market space by changing what you offer. Our article on blue ocean strategy covers the mechanics. Category creation adds the naming and education layer: you don't just find open space, you teach the market to see it.
First-mover advantage. The academic starting point is Marvin Lieberman and David Montgomery's "First-mover advantages", published in Strategic Management Journal, volume 9, in 1988 (pages 41-58). The useful lesson for category builders: being first is a position to defend, not a guarantee. Read more in our piece on first-mover advantage.
Positioning. April Dunford, who writes about B2B positioning, describes it on her own site as defining how a product is different and better than alternatives for a particular set of customers. Category creation is one extreme of that: instead of picking alternatives to beat, you try to remove the comparison set and write a new one.
Economic moat. A category you define can become a defensive position if the lead compounds through brand, data or switching costs. That's the link to an economic moat, and it's also why network effects show up so often in stories about category leaders.
Create, reposition, or pick a subcategory
You don't have to invent a category to grow. Most successful companies don't. Here's how the three main routes differ.
| Create a new category | Subcategory of an existing one | Reposition in an existing category | |
|---|---|---|---|
| What you change | The problem and the market definition | The segment or use case inside a known market | The story and comparison set only |
| Buyer knowledge | Low, you must educate | High, buyers know the parent category | High |
| Competition | Few direct rivals at first | Specialists and the category leaders | Everyone in the category |
| Cost to the company | High: content, events, sales education | Medium | Lower |
| Main risk | Nobody budgets for it | Being squeezed by a broader player | Looking like a me-too vendor |
| Best when | The problem is real but unnamed | You win clearly for a defined segment | Your product is better on a criterion buyers already care about |
The middle option is underrated. Picking a subcategory lets you borrow the parent category's demand while setting your own criteria for the segment you serve. Plenty of strong companies grow this way without ever teaching a market from zero.
When category creation is worth it
Creating a category makes sense when several conditions hold at once:
- The old category really does fail the buyer. Not "slightly worse," but structurally unable to solve the problem, so no amount of feature work will close the gap.
- The pain is widespread and recurring. A rare problem can't support a market.
- You can survive the education period. Teaching a market takes time and cash. Track runway honestly before committing to a long educate-first strategy.
- You can defend the lead once it's visible. If a larger competitor can copy you in a quarter, you've paid for their category.
- Your go-to-market can carry a new concept. A clear go-to-market strategy matters more here, because buyers won't find you by searching for a category that doesn't exist yet.
If you can't tick most of these, repositioning or a subcategory is usually the safer move.
The costs and risks
Category creation is expensive in ways that don't appear in a pitch deck.
Educating the market is slow. Buyers only search for things they already know. Early on, you spend on thought leadership, events and sales calls that begin with "here's the problem," not "here's the price."
Competitors can free-ride. If you spend heavily to create demand and a rival simply attaches itself to the new label, they get the benefit of your education without paying for it. The risk is highest when your product is easy to copy.
Naming can fail. A clever label that buyers don't adopt is worse than no label. If sales has to explain the category before every demo, the name is working against you.
You can create a category with no market. Sometimes the problem is real to you but not urgent enough for buyers to spend money on. This is the category version of building something nobody wants, and it ties directly to product-market fit.
Being first isn't the same as winning. The first-mover literature, including the Lieberman and Montgomery paper above, treats early entry as a trade-off. Later entrants can learn from your mistakes and enter with a sharper product.
An illustrative example
This is our own made-up scenario, not a case study. Imagine a software company whose product helps teams track approvals that currently live in email threads. Buyers today file it under "project management," where it looks like a weak feature set next to bigger tools.
The company has three options. It could reposition inside project management, emphasizing approval speed. It could choose a subcategory such as "approval workflow software for finance teams." Or it could try to name a new category, say "decision operations," and teach buyers that approvals are a distinct discipline.
The new-category route only pays off if finance, legal and operations leaders all feel the same pain and are willing to create a budget line for it. If the pain is mostly felt by one team, the subcategory is probably the better bet. The point of the example is that the choice is a bet on how widely the problem is felt, not on how good the name sounds.
A practical way to test the idea
Before committing to a category, run a few cheap tests:
- Say the problem without your product. If buyers nod at the problem description alone, you have something to name.
- Check what they search for today. If nobody searches for the problem, expect to pay for every bit of awareness.
- Ask for a budget line. If a buyer can't tell you which budget would fund this, the category may not exist yet.
- Test the name on cold prospects. If they repeat it back correctly after one explanation, it's sticky.
- Check your funding timeline. A long education phase pairs poorly with a short runway or a tight burn rate.
Key Facts: Category Creation
- Category creation means defining a new problem and market so your company sets the buying criteria, rather than competing on an incumbent's terms.
- Play Bigger (2016) by Ramadan, Peterson, Lochhead and Maney popularized "category design" and "category kings," with examples including Amazon, Salesforce, Uber and IKEA (Insight Partners).
- Lieberman and Montgomery's "First-mover advantages" appeared in Strategic Management Journal in 1988, and remains the standard academic reference on pioneering.
- April Dunford frames positioning as defining how a product is different and better than alternatives for specific customers (aprildunford.com).
- The three routes are a new category, a subcategory, or repositioning inside an existing category. Most companies don't need the first.
- The main costs are market education, free-riding competitors, and the risk that buyers never create a budget for the problem.
Related reading
On this page
- Category creation, in plain terms
- The Play Bigger idea: category design and the category king
- Where this sits next to other strategy ideas
- Create, reposition, or pick a subcategory
- When category creation is worth it
- The costs and risks
- An illustrative example
- A practical way to test the idea
- Related reading